JOSEPH STIGLITZ

AS SCOTLAND contemplates independence, some, such as Paul Krugman, have questioned the “economics”. Would Scotland, going it alone, risk a decline in standards of living or a fall in GDP? There are, to be sure, risks in any course of action: should Scotland stay in the UK, and the UK leave the EU, the downside risks are, by almost any account, significantly greater.

Should Scotland stay in the UK, and the UK continues in its current policies which have resulted in increasing inequality, even if GDP were slightly larger, the standards of living of most Scots could fall. Cutbacks in UK public support to education and health could force Scotland to face nothing but a set of unpalatable choices – even with Scotland having considerable discretion over what it spends its money on.

But there is, in fact, little basis for any of the forms of fear-mongering that have been advanced. Krugman, for instance, suggests that there are significant economies of scale: a small economy is likely, he seems to suggest, not to do well. But an independent Scotland will still be part of Europe, and the great success of the EU is the creation of a large economic zone. Besides, even small political entities, like Sweden, Singapore and Hong Kong have prospered, while much larger entities have not. By an order of magnitude, far more important than size is the pursuit of the right policies.

Another example of a non-issue is the currency. There are many currency arrangements that would work. Scotland could continue using sterling – with or without England’s consent. (The argument that if it were done without their consent, Scotland would have no say in monetary policy is hardly convincing: even if it had some voice, monetary policy would be dominated by England.) Because the economies of England and Scotland are so similar, a common currency is likely to work far better than the euro – even without shared fiscal policy. But many small countries have managed to have a currency of their own – floating, pegged or “managed”.

The fundamental issue facing Scotland is different. It is clear that there is, within Scotland, more of a shared vision and values – a vision of the country, the society, politics, the role of the state; values like fairness, ­equity and opportunity. Of course, not everyone in the country agrees on the precise policies, on the delicate balancing of complicated trade-offs. But the Scottish vision and values are ­different from those that have become dominant south of the Border. ­Scotland has free university education for all; England has been moving ­towards increasing student fees, ­forcing students with parents of limited means to take out loans. Scotland has repeatedly stressed its commitment to the National Health Service; England has repeatedly made moves towards ­privatisation. Some of these differences­ are of long-standing: even 200 years ago, male literacy rates in Scotland were 50 per cent higher than in England, and Scottish universities charged fees that were one tenth of those at Cambridge and Oxford.

Differences in these and other related policies can, over time, lead not only to markedly different growth rates, and thus to markedly different levels of GDP per capita – swamping any slight short run impact – but also, and more importantly, to differences in the distribution of income and wealth. If the UK continues on its current course, imitating the American model, it is likely that the results will be like those of the US – where the typical family has seen its income stagnate for a quarter of a century, even as the rich get richer.

Independence may have its costs – although these have yet to be demonstrated convincingly; but it will also have its benefits. Scotland can make investments in tidal energy, or in its young people; it can strive to increase female labour force participation and provide for early childhood education – both essential for creating a fairer society.

It can make these investments, knowing that the country will recapture more of the benefits from them through taxation. Under current arrangements, while Scotland bears the cost of these social investments, the extra tax revenue resulting from the additional growth resulting from these investments will go overwhelming south of the Border.

The difficult question that Scotland has to face is thus not about arcane issues about monetary arrangements or economies of scope, about the ­minutiae of the short run gains and losses, but whether Scotland’s future – its shared vision and values, a shared ­vision and values that has increasingly departed from those dominant south of the Border – will be better achieved through ­independence. «

• Joseph Stiglitz is a professor at Columbia University and a Nobel laureate in economics